High levels of volatility in global markets have again driven opposing behaviours between Australian active investors and high net worth investors in regards to demand for overseas assets. This was a key finding of the October Certitude Global Investing Intentional Index (CGIII).
The CGIII, which collates the views of 515 actively engaged leading investors and measures their net demand for global investments, decreased by 5% in October, and is now at its lowest level since February 2014.
Against a backdrop of market volatility not experienced since 2008, active investors’ concern levels increased to 6.1 out of 10 in October, the highest level since August 2013. On the other hand, demand from high net worth investors for overseas assets increased, as they identified significant buying opportunities on the back of weak pricing data.
Craig Mowll, CEO of Certitude Global Investments said: “Results this month showed that volatile market conditions have created uncertainty and some degree of caution in the minds of many active investors. But what was also noticeable was the fact that high net worth investors were clearly unconcerned about long term fundamentals, and instead seized the opportunity of increasing their exposure while prices were momentarily depressed.
“Equities remained by far the most popular choice of international asset, with 81% of investors interested in gaining exposure to global markets via shares. This was 4% pts fewer than last month, no doubt a response to volatility in international markets. In fact, when investors were asked what was currently stopping them from investing more in overseas markets, 25% cited market volatility, up from only 17% in September.
“What is worth noting however, is that at the same time that demand for equities dropped, demand for alternative asset classes, such as private equity funds, hedge funds, infrastructure and commodities all increased. This was clearly a case of investors looking to mitigate portfolio risk by choosing assets classes with low correlation to equity markets.”
When asked about the intended timing of their next overseas investment, 37% of investors said they would invest in the next three months, the same proportion as last month. This is a clear indication that despite the recent volatility, investors are not shunning international markets and still see potential for returns looking forward.
Commenting on this month’s results, Mr Mowll said: “There is no question that investors are feeling more concerned than usual about global markets and that this anxiety has translated itself into very volatile market conditions around the world.
“At the same time, astute investors have taken steps to mitigate risk through the use of alternative asset classes, like hedge funds, in order to smooth returns. And high net worth investors have their eyes firmly on the end game. They remain committed to maintaining exposure to international markets while using short term price weakness to their advantage, increasing exposure to assets with good long term potential.”
October CGIII – Key findings:
The CGIII dropped from 177 in September to 168 in October. This is the lowest level since February.
The CGIII for high net worth investors (those with $1 million or more to invest) increased from 176 in September to 181 in October.
25% of investors cited market volatility as the biggest barrier to investing overseas, up from 17% last month, and 29% said they weren’t interested, up from 21% last month.
The proportion of investors interested in equities for their overseas exposure decreased by 4% pts in October, to 81%.
The percentage of investors looking to invest overseas in the next three months remained steady at 37%.
Leave a Comment
You must be logged in to post a comment.